Date of Award
Spring 2024
Document Type
Dissertation
Degree Name
Doctor of Philosophy (PhD)
Department
Economics
First Advisor
Zilibotti, Fabrizio
Abstract
n my dissertation, I study how globalization affects economic growth, environment, and welfare. Local environmental regulations can stimulate homegrown clean technology innovation, thereby contributing to the reduction of global emissions over the long term. However, in the short term, these regulations may lead to the displacement of polluting activities to other regions, undermining their initial efficacy. In Chapter 1, I construct a structural model that incorporates both clean innovation and production relocation and use the model to assess the short- and long-term effects of environmental policies. Using a comprehensive firm-level dataset, I begin by documenting that more stringent local environmental policies are associated with an increase in the number of clean patents at the firm level. However, this association diminishes as firms produce a larger share of their total output abroad. Motivated by this evidence, I develop a dynamic general equilibrium semi-endogenous growth model of the world economy. I focus on endogenous innovation in both clean and dirty technologies, as well as the choice of production locations for firms specializing in different technologies. Local environmental policies lead to the relocation of dirty production in the short run. Endogenous innovation in clean technology that results from such policies enhances the country's technological comparative advantage in clean technology, ultimately leading to the deployment of clean technology in foreign production locations in the long run. I show that environmental policies can have opposing effects in the short and long run. Counterfactual analysis shows that if both the US and EU countries increase the stringency of their environmental policies to the level of the most stringent EU country, global CO2 emissions will decrease by 4.7 percent. The welfare implications are asymmetric across countries: in the steady state, the consumption-equivalent welfare gains are almost twice as large for EU countries as for the US. Globalization influences economic development not only via innovation but also through technology diffusion. In Chapter 2, I develop a dynamic spatial growth model to explore how technology diffusion through international trade and internal migration contributes to spatial development and aggregate growth. I consider an economy in which growth is shaped by the best global and local ideas that contribute to the local stock of knowledge. Global ideas diffuse to locations through international trade. Local ideas diffuse across space when workers migrate. I embed the diffusion of ideas through trade and migration into a dynamic spatial framework with international trade, forward-looking migrants, and endogenous capital accumulation. I characterize the equilibrium properties of the model, prove uniqueness of the balanced growth path, and show how to take the model to the data for counterfactual analysis. As an application, I study China’s spatial and aggregate growth during the 1990s and 2000s. I find that international trade and internal migration are important channels for technology diffusion that contributed to China's spatial and aggregate growth, with heterogeneous effects across space. Using patent data, I provide empirical evidence of technology diffusion through international trade and migration. Labor and product market power also play an important role in shaping welfare consequences of globalization. In Chapter 3, I study the relationship between labor and product market power through tradability. Using US Census Bureau data on establishment shipments, I show that measuring product market power at the location where sales takes place, as opposed to where production occurs, breaks the tight connection between labor and product market power. I find that the strength of the relationship is dictated by the tradability of output in the sector. I develop a multi-region general equilibrium model featuring both types of market power that rationalizes our empirical findings. Equipped with the model, I study how labor and product market power jointly shape the passthrough of productivity to real wages following a reduction in trade costs.
Recommended Citation
Xiang, Wei, "Essays on Economic Growth, International Trade, and Environment" (2024). Yale Graduate School of Arts and Sciences Dissertations. 1468.
https://elischolar.library.yale.edu/gsas_dissertations/1468
